Analysis of the Ethiopia and Kuwait Bilateral Investment Treaty

Essay, 2019

7 Pages, Grade: A+



I. Introduction

II. Body Part
A. Preamble
B. Scope and Definition
C. Treatment of Investments
D. Protection of Investments
E. Expropriation
F. Transfer of Related to Investments
G. Other Clauses
H. Settlement of Disputes
I. Institutional issues
J. Treaty Duration, Amendment and Termination

III. Conclusion

I. Introduction

The treaty type which is subject to this analysis is a bilateral investment treaty made between Ethiopia and Kuwait (here in after contracting parties), which is signed 14/09/1996 and entered into force 12/11/1998. I analyzed the treaty beginning from preamble to provision of duration and termination.

II. Body Part

A. Preamble

The main initiative for the contracting parties of the treaty as evidenced under the preamble is with a desire to create favorable conditions for the development of economic cooperation between them. Particularly it is for investment by investors of one contracting state in the territory of the other contracting state. It recognizes encouragement and reciprocal protection of such investments will be conducive for the stimulation of business initiative and the increase of prosperity in both contracting states.[1]

However, the preamble of this treaty is criticized, because of: there is no reference to right to regulate (e.g. regulatory autonomy, policy space, flexibility to introduce new regulations and so on; there is no any reference to sustainable development; there is no reference to social investment aspects (e.g. human rights, labor, health, CSR, poverty reduction and so on); and there is no reference to environmental aspects (e.g. plant or animal life, biodiversity, climate change).

B. Scope and Definition

The other concern of the treaty which worth of analysis is on the scope and definition of the treaty terms provided under article 1 of the treaty.[2] It gives a definition for investment and investor. Under Article 1, the treaty defines investment and it is a type of Asset-based definition. The term "investment" means every kind of asset, owned and controlled directly and indirectly by an investor of a contracting state and invested in the territory of the other Contracting state in accordance with the latter’s laws and regulations and, in particular, though not exclusively, includes:(a) tangible, intangible, movable, immovable property and any related property rights such as leases, liens, pledges, mortgages, usufructs, and other similar rights; (b) a company, business enterprise and joint venture, or shares, stock and any other forms of equity participation… in company…; (c) “associated activity”, ”returns” retained for the purpose of re-investment and the proceeds from “liquidation” as these terms defined under the treaty; (d) claims to money or to any other assets or performance having an economic value;(e) intellectual and industrial rights, including, but not limited to, copyrights, patent, industrial design, know-how and technical process, trade name, trade secret and good will;(f) any right conferred by law, contract or by virtue of any licenses or permits pursuant to law, including right to prospect, explore….

Limitations to the definition of investment are: (i) no exclusion of portfolio investment, (ii) no exclusion of other specific assets (e.g. sovereign debt, ordinary commercial transactions, etc.), (iii) not list required characteristics of investment,(iv) it contains "in accordance with host State laws" requirement, (v) doesn’t sets out closed (exhaustive) list of covered assets.

Under Article 1(2) there is a definition for investor. The term "investors" means with regard to either Contracting Party: (a) Natural persons who have nationality of that Contracting party in accordance with its laws; (b) government of the contracting state and any juridical person or other entity legally constituted under the laws and regulations of that contracting state and incorporates illustrative lists.

The limitation of the treaty in definition of investor includes: in specifying natural persons it don’t includes permanent residents, and not specifies whether it excludes dual nationals.

It specifies cover of legal entities but it did not includes requirement of substantial business activity and did not define ownership and control of legal entities. It doesn’t contain denial of benefits (DoB) clause and its content "Substantive business operations" criterion not applicable.

It don’t apply to investors from States with no diplomatic relations or under economic/trade restrictions. Discretionary ("Party may deny") or mandatory ("benefits shall be denied"), not applicable.

With respect to substantive scope of the treaty or limiting substantive scope of the treaty, it didn’t exclude taxation, subsidies, grants, government procurement or other subject matter.

With respect to temporal scope of the treaty (investments covered), it applies to both pre-existing and post-BIT investments.[3] But it didn’t stipulate disputes covered.

C. Treatment of Investments

Under article 4 of the treaty demands each contracting state at all times ensure investments made in its territory by investors of the other contracting state fair and equitable treatment, which should not be less favorable than that which accords in like situations to investments of its own investors or investors of any third state, whichever is the most favorable. That means it pursues both most favored nation treatment/MFN/ and national treatment/NT/.[4] The type of NT clause is post-establishment by reference to "like circumstances" (or similar). Most-favored-nation (MFN) treatment clause is also post-establishment, with exception of economic integration agreements and taxation treaties.[5] The fair and equitable treatment/FET/ under article 4 is unqualified as it is not qualified by reference to international law or by listing FET elements (exhaustive or indicative lists). By this we can understand that the agreement incorporates the “Hull-doctrine”.

D. Protection of Investments

Under Article 3 of the treaty the protection of investments is full protection and security, which include a standard prohibition of unreasonable, arbitrary or discriminatory measures.[6] As it reads investments by investors of either contracting state shall enjoy full protection and security in the territory of the other contracting state in a manner consistent with recognized principles of international law and the provisions of this agreement. Neither contracting state shall in any way impair by arbitrary or discriminatory measures the management, maintenance, use, enjoyment or disposal of investments.

E. Expropriation

Under article 6 of the treaty investments made by investors in the territory of either of the contracting states shall not be expropriated, nationalized, dispossessed or subjected to direct and indirect measures having effect equivalent to nationalization, expropriation, dispossession, except for public purpose and upon payment of prompt, adequate and effective compensation, on a non-discriminatory basis and in accordance with due process of law of general application. Such compensation shall amount to equal value of the expropriated investment, computed on basis of fair-market value (as of a principle) of the expropriated investment at a time immediately before the expropriatory action was taken or the impending expropriation become publicly known which is earlier. If fair market value can’t be readily ascertained the compensation shall be determined on equitable principles. The compensation finally determined shall be promptly paid to the investor in a freely convertible currency and without delay. The valuation and payment of compensation is subject to right prompt review by a judicial or any other competent and independent authority in that contracting state. The strongest side of this provision is it prohibits both direct and indirect type expropriation, and absolute right to compensation in certain circumstances. The grounds of expropriation are clearly mentioned.[7] The critique this provision is that it doesn’t define what constitutes indirect expropriation.

F. Transfer of Related to Investments

Under article 7 of the BIT the each contracting parties are obliged to guarantee investors of the other contracting state the free transfer of payments in connection with an investment into and out of its territory. This provision includes transfer of funds with specification or illustrative list from Article 7(1) (a-i). However, it doesn’t stipulate exceptions to the transfer of funds obligation like for instance balance-of-payments (BoP) exception and other specific exceptions (e.g. to protect creditors, etc.).


[1] Preamble of the Ethiopia-Kuwait Bilateral Investment Treaty, available at: [last accessed 29 June, 2019]

[2] Id, Article 1.

[3] Article 13

[4] Article 4/1/&/2/

[5] Article 4/3/

[6] Article 3

[7] Article 6(4).

Excerpt out of 7 pages


Analysis of the Ethiopia and Kuwait Bilateral Investment Treaty
Bahir Dar University  (School of Law)
Seminar on Contemporary Issues of Business
Catalog Number
ISBN (eBook)
analysis, ethiopia, kuwait, bilateral, investment, treaty
Quote paper
Tewachew Alem (Author), 2019, Analysis of the Ethiopia and Kuwait Bilateral Investment Treaty, Munich, GRIN Verlag,


  • No comments yet.
Read the ebook
Title: Analysis of the Ethiopia and Kuwait Bilateral Investment Treaty

Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free